Armenia

Market Overview
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Armenia is a member of several multilateral treaties (including the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) Convention and the Energy Charter Treaty) aimed at encouraging and protecting investments. These treaties provide investors with legal certainty, protection, and reduced tax burdens, fostering a secure and predictable business environment.

Championing Open Trade: Armenia's commitment to international trade extends to its World Trade Organization (WTO) membership. This membership ensures adherence to multilateral trade rules, further solidifying Armenia's reliable and transparent trading partner position.

At the Heart of Eurasia: As a member of the Eurasian Economic Union (EAEU), Armenia enjoys tariff-free trade with Russia, Belarus, Kazakhstan, and Kyrgyzstan, a market of over 200 million consumers. This membership simplifies customs procedures and opens doors to a vast economic area.

Beyond the Basics: This is just the tip of the iceberg. Armenia boasts a simplified business registration process, a competitive corporate tax rate of 18%, and a skilled and educated workforce. Its strategic location between Europe and Asia, coupled with a growing tech sector and a thriving tourism industry, adds further appeal.

Explore the Potential: Whether you're an entrepreneur eyeing new markets, a lawyer advising clients on cross-border investments, or a business leader seeking expansion opportunities, Armenia stands ready to welcome you with open arms. This Doing Business guide serves as your compass, navigating the legal intricacies and illuminating the path to success in this dynamic and promising nation.

Main Trade Sectors:

Armenia's economy is mainly based on agriculture, mineral extraction, renewable energy (hydro and solar) generation, telecommunications services, ICT, jewellery production and sale, banking and financial sectors, and tourism.

  • Services represent 52.8% of GDP and employ 51% of the active population.
  • Agriculture plays a significant role in Armenia's economy, contributing to 11.3% of the GDP and employing 24% of the workforce.
  • Armenia possesses substantial deposits of copper, molybdenum, zinc, gold, and other metals, forming the basis for the country's mining industry and main exports. The mining sector is still a major contributor to GDP and exports.
  • Renewable energy is well-developed, including traditionally developed hydropower plants, with solar energy solutions emerging in the recent decade. In general, the energy sector is an important part of the economy, and Armenia exports electricity, with the mining sector being a significant consumer.
  • The ICT sector is also growing and is considered a priority by the government; in addition to many assistance programs, IT startups can benefit from a beneficial tax regime.
  • The banking sector has grown in particular: it is considered a solid and stable sector composed of 18 commercial banks (banks.am).

Business Environment (specific considerations Foreign Investors)

The Republic of Armenia has an “open-door” policy for foreign investments. It is one of the most open investment regimes among the CIS countries. The legislation allows smooth processes of starting and conducting business in Armenia and provides investment protection mechanisms through national and international instruments.

Key factors to consider when starting your business in Armenia:

  • Լimited liability company (one of the most common types of legal entities in Armenia) can be registered through an accelerated process in less than an hour (provided that the founders and the director are present in Armenia in person.
  • The standard registration process of Limited Liability Companies and Closed Joint Stock Companies usually takes 1-2 days (with certain exceptions for CJSCs.
  • With very few exceptions (mostly licensed media /television and related/ activities), there is no local participation requirement; companies in practically all sectors are allowed to have 100% foreign participation.
  • The directors, members of boards and any other employees of the company may be foreign citizens (note that employment permit and residence permit requirements may still be applicable), and they don’t have to reside in Armenia.
  • There is no minimum charter capital requirement for any type of company (there are very few sector-specific exemptions - mainly in the financial sector).

The law “On Foreign Investments” guarantees national treatment and non-discrimination of foreign investors. It explicitly determines that the laws applicable to foreign investment cannot be less favourable than those governing the property rights and investment activities of Armenian citizens and legal entities. Armenian law does not determine requirements for pre-approval or approval of such foreign investment by any state body, and the investment can be carried out without any prior interaction with the government or without any prior authorisation.

The only exception is that foreign citizens and persons without citizenship have no right to own land in Armenia (given the exemption from this rule, in practice, the limitation applies only to agricultural land and forests). However, foreigners are allowed to use land through long-term lease contracts and obtain other rights (such as the right of development) that do not grant a right of ownership. Furthermore, the limitation does not apply to fully foreign-owned companies incorporated in Armenia, meaning the land can be owned through an SPV without restriction.

Benefits and Incentives for doing business in Armenia.

There are certain benefits to doing business in Armenia. The Armenian government has implemented various policies and programs to promote entrepreneurship and attract foreign investment. Some of the incentives and incentives and benefits for doing business in Armenia include:

  • Armenia ranks one of the highest in the Logistics Performance Index: 3rd in the CIS region, with excellent customs and logistics quality performance.
  • Armenia has 4 Free Economic Zones with NO profit tax, VAT, or property taxes.
  • Armenia allows 100% foreign ownership of local business entities.
  • Equal opportunities for local and foreign investors.
  • “Grandfathering” investment-related legislation stabilisation clause for five years after the [each] investment.
  • Armenia has no restrictions on remittances, repatriation of profits, or proceeds.
  • A sustainable banking system following international standards and best practices.
  • Free currency exchange, stable local currency.

The Government of Armenia provides incentives for businesses, including tax exemptions for activities in bordering and other communities, customs duties exemptions for importing certain goods and equipment, tax benefits for the IT and medical sectors, and many more.

Legal System, Foreign Investment Restrictions

Legal System։

Armenia uses the continental civil law system. The Civil Code of Armenia is based on the Napoleonic Code, whereas the German model shaped administrative legislation.

Judicial Order:

Armenia's civil court system consists of three tiers. The first tier is the court of general jurisdiction of the first instance, which is the lowest level. The second tier is the Court of Appeal, and the highest tier is the Court of Cassation, serving as the supreme authority in the system. In addition to the court of general jurisdiction, specialised courts are also allowed by the Constitution; specialised administrative, bankruptcy and anti-corruption courts are created and functioning.

In terms of the hierarchy within this three-tier structure, decisions made by the Court of First Instance can be appealed to the Court of Appeal, and decisions made by the Court of Appeal can further be appealed to the Court of Cassation.

Enforcement of foreign judgements and awards:

Foreign or international arbitration awards or a foreign court decision can be recognised and allowed to be enforced in Armenia. Court practice on the matter is quite rich and positive. In addition to international treaties allowing for such recognition and enforcement, Armenian procedural legislation has enlarged the possibilities of such recognition. Since 2018, the Armenian civil procedure code has foreseen the possibility of recognising and enforcing the foreign court order on the grounds of reciprocity, which is presumed to be present unless proven contrary.

Arbitration and Mediation:

Armenia's arbitration legal framework is based on UNCITRAL principles. As a member of the New York Convention, the arbitral awards rendered in Armenia can be enforced in other New York Convention member countries and vice versa. There are a number of arbitration centres offering parties a range of institutional options to administer their disputes. Additionally, ad-hoc arbitration can be utilised, affording parties the flexibility to customise proceedings to their specific requirements, thus consolidating Armenia's reputation as a jurisdiction conducive to arbitration.

Armenia is a signatory to the Singapore Convention on Mediation. Further, the domestic legislation under the Law on Mediation comprises regulations regarding the certification of mediators. In some cases, parties are required to attempt mediation before pursuing court action. However, it's important to note that mediation is not widely utilised in Armenia. Additionally, the Financial System Mediator's Office, established by the Central Bank of Armenia (CBA), handles disputes between financial institutions licensed by the CBA and their clients. Despite its name, this office functions more as a Financial Ombudsman rather than a mediation process. Nonetheless, it serves as a popular alternative dispute resolution mechanism in the financial sector, aiming to safeguard the rights of customers.

Taxation

The following are the general types of taxes which are paid in Armenia:

  • value-added tax (20%),
  • profit tax (18%),
  • Income tax for dividends (5%) /applicable only to individuals/,
  • property tax (0,05%-1,5 % from the market value price of the property),
  • income taxes (20%; certain exceptions are applicable depending on the nature of income),
  • excise taxes,
  • turnover tax (1.5-10% of turnover for businesses that are not VAT payers) is a beneficial tax regime for small businesses.

Armenia has treaties on excluding double taxation and preventing fiscal evasion with 51 counties.

Further, Armenia is a member of the EAEU, which leads to the regulation of custom-related matters as per the EAEU customs code by the country through the implementation of similar rules into the local legal acts.

Corporate legislation:

Limited Liability Companies (LLC) and Closed Joint Stock Companies (CJSC) are two main types of corporate vehicles. LLCs are usually used as an SPV with one participant or for simpler arrangements. CJSCs are better fitted for situations when there is a more complex relationship between the shareholders, and the relationships thereof should be regulated. Particularly, the law on JSC indicates the option of concluding a shareholder agreement between shareholders. The legislation further regulates the shareholding option scheme of employees and foresees more complex corporate law regulations.

The legislation recognises the fiduciary duties of executive bodies (including the board and the director). It indicates certain instances where the corporate veil may be pierced. The company's shareholders may be brought to liability (e.g., within bankruptcy proceedings), which are limited and are interpreted by courts in a restricted manner.

Competition law:

Competition Protection Commission of the Republic of Armenia is the main state body carrying out control over compliance with competition law requirements. The RA Law on Competition Protection indicates the main principles and regulations of the competition law.

In certain instances, the Mergers and Acquisition as a concentration are subject to declaration before the commission (depending on the volume of assets and income of the parties to the concentration). Furthermore, the legislation indicates regulations aimed at protecting consumers and competitors from unreasonable reductions or increases in prices, anti-competitive agreements, cartels, unfair competition, etc.

It is noteworthy that the legislation considers the group of persons as an economic entity, and respectively, when carrying out control over compliance of laws, considers not only the separate individual and legal entity in isolation but also individuals and legal entities having affiliation therewith jointly.

Labour law.

Armenia has been a member state of the International Labour Organisation since 1992. The main legal framework governing labour relations in Armenia consists of the Labour Code and pertinent international agreements. Labour relationships are mainly based on labour contracts, which must be concluded between the parties prior to the commencement of employment.

The legislation can generally be considered employee-centric. The legislation limits the situations and cases when the employment contract may be terminated unilaterally (which is, however, in line with similar European regulations) and only through procedures regulated by law. However, the employer is fully authorised to choose the structure of the company and the number of employees they need as an exercise of the constitutional principle of freedom of entrepreneurship/economic activity, which means, in practice, the layoffs cannot be subject to external control regarding the bases of such action. Further, the employees have the right to form representative bodies, such as trade unions or workers councils, which are elected by workers' assemblies or conferences. Additionally, the Law on Trade Unions governs and ensures the rights and activities of trade unions in Armenia. However, trade unions are not established well in Armenia, and in general, even where they are present, they are not very active in labour law-related processes.

Current Opportunities and Future Prospects

Development and construction are booming in and on the outposts of the capital city. Mostly, it is residential and business area construction is taking place.

The IT sector in Armenia continues to be a highly advanced and desirable business field. It is currently elevating its market position, partly due to the influx of major IT companies relocating from Russia.

Mining, banking, financial institutions, and energy business activities are well-developed yet remain attractive for investment opportunities.

Officials are focusing on agriculture and capital markets to improve the current situation, i.e., developing high-margin agriculture production and having a more active and advanced capital market.

Keep in mind!

Armenia is a member of the Committee of Experts on Evaluating Anti-Mօney Laundering Measures and the Financing of Terrorism - Moneyval. Thus, the relevant legislation was adopted and has been applied after that in the territory of Armenia.

Business entities which are registered in the country are obliged to declare their ultimate beneficial owners. The information about ultimate beneficial owners is publicly available data.

Although this creates certain additional obligations for businesses operating and creates a necessity for additional resources, this provides additional transparency measures in the business operations and creates additional mechanisms for combating and preventing ML-TF practices.

Top tips to takeaway "What to know before Investing"

Depending on the nature and volume of investment, it is important to retain relevant consultants (or at least to receive general advice from them) to assist the investors throughout the process of investment and subsequent implementation of the projects:

  • It is critical to hire a [local] tax and accounting consultant at all times to ensure that accounting and tax reporting obligations and the related payment obligations are duly complied with.
  • Depending on the nature of the project, it is recommended to have a legal consultant,
  • If the investment plan may have any environmental law-related implications, it is recommended to hire not only a relevant legal practitioner but also a consultant of ecology or of a respective field to evaluate the feasibility of the project from the perspective of environmental law requirements.

Further, it is advised to:

  • Reach out to relevant business associations (currently in Armenia, you can find such associations including the Armenia chapter of the International Chamber of Commerce, American Chamber of Commerce, British Chamber of Commerce, German Business Association, French Chamber of Commerce and Industry, European Business Association and many more /please check with your local chamber of commerce and industry and with Embassy in Yerevan to see if they have representatives or affiliated organisation in Armenia).
  • It is not necessary to schedule meetings with state authorities or relevant ministries unless they are explicitly required for the project's objectives, such as during the implementation of a PPP (Public-Private Partnership). While these meetings may yield positive outcomes for social media purposes, they rarely contribute substantially to the project's development and investment. Additionally, any verbal advice provided by the state authorities on the spot, without reviewing project documents, should be treated with caution, as the relevant officials may not have a comprehensive understanding of the project and its processes. It is essential for consultants to cross-check and verify any such advice before considering it applicable to the specific project.

Join now and be part of a vibrant business community that constantly innovates, perfects its skills and creates value while enjoying Armenia's stunning landscapes, rich culture, and welcoming people.

Don't miss the unique opportunity to grow your business in Armenia, where Concern Dialog law firm can be your primary navigator!

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Arbitration

The Role of Arbitration in Strengthening Armenia’s Business Climate

Over the past few years Armenia has been laying the groundwork for a more transparent and business friendly environment. One domain that has great potential but somewhat remains untapped, is arbitration. In today’s rapidly changing global market, investors look for fast results, impartiality and flexibility, something that can be achieved through arbitration and not traditional court proceedings. For Armenia, providing this level of efficiency should not just be optional; it should be a necessity, since we are closer than ever to making arbitration a defining feature of our legal and business landscape.   The Armenian landscape: What’s the Current Status? Armenia is no longer a trend follower; it has gained solid momentum in arbitration. Adopting UNCITRAL Model Law in 2006 was its beginning. The real progress should be in how we continue to adapt and meet the evolving needs of foreign investors and businesses. We are, I believe, moving beyond theory, and the ongoing shift from policy to real-world application reflects Armenia’s growing commitment to becoming a key player in the region’s arbitration landscape.   What Needs to Happen for Armenia to Move Forward Armenia has come a long way in positioning itself as a reliable and business-friendly destination. In fact, it may be further along in arbitration than many may realize. The legal infrastructure is ready and the international ties are improving. Geographically, it is uniquely positioned between Europe and Asia and this could be a great opportunity to become a regional arbitration hub in the South Caucasus. What is needed now is not a complete overhaul, the right steps simply need to be taken to fully tap into the potential. As Armenia steps deeper into regional trade, especially with major initiatives like the North-South Transport Corridor, arbitration is becoming more than relevant. It is essential. Its location between Iran, Russia, and the EAEU gives it real leverage, and trade is growing fast. Sectors like banking, logistics, and infrastructure are seeing more cross-border deals and with that comes risks, not every deal goes smoothly, and that’s exactly where arbitration plays a crucial role. The North-South Corridor is already changing the game. It is bringing in investments, improving infrastructure, and creating long-term commercial links. Naturally, this dynamic creates the need for reliable dispute resolution. Armenia has what it takes. But now, it is about sharpening the tools. We need more institutional backing to ensure international partners see us as stable, fair, and ready. With a few smart moves, Armenia can position itself as a trusted hub for resolving regional trade disputes not just in the INSTC, but well beyond it. That said, the next step should focus on encouraging a mindset shift by raising awareness and education, particularly among the local business community. While arbitration as an alternative dispute resolution method is gaining popularity, there is still a need for more open dialogue and hands-on guidance to help with the shift, people need to see real examples and tangible benefits. Institutional support is the next crucial step. Armenia is becoming more active in the global arbitration scene and it is no longer sitting on the sideline. It is strengthening its connections with respected international arbitration institutions such as ICC. With more support and presence from these bodies, it can gain greater trust amongst international investors that shows Armenia is engaged, forward-thinking and serious about creating incentives and favorable conditions. Moreover, making a few practical moves could go a long way, such as offering incentives by reducing arbitration related fees and promoting contracts that are arbitration-ready and include clear clauses. These may seem like minor adjustments, but they could create a real difference and encourage more businesses to choose arbitration from the outset. With all that said, the vision of becoming an arbitration hub is not far-fetched, the path is being paved, the foundation is solid. With just a few constructive refinements, we can own that space.   Why Arbitration Matters for Armenia’s Future Arbitration should not be merely seen as an alternative legal tool, it is a strategic asset tied directly to Armenia’s future economic growth. The global trend is clear, according to The World Bank, countries with strong arbitration systems attract more foreign direct investments (FDI). And it makes sense, Investors need reassurance that their interest will be protected at all cost and building that foundation of trust can go a long way. By leveraging arbitration, Armenian can offer exactly that, a solid sense of security and trust for foreign investors. This kind of reputation does not just bring in capital, but more importantly builds long-term partnerships, strengthens the economy and positions it on the international map. At this stage, arbitration is not just ‘nice to have’, it is a critical component in turning this country into a thriving and investment-ready nation.   Looking Ahead: What It’ll Take Arbitration has the potential to fundamentally transform the way business is done in Armenia. It is a strategic key that can unlock real economic growth and long-term trust in the system. It has the chance to go from being a place where business just happens to a place where it thrives. The adoption of the Model Law was only the beginning, the real change has to happen in the mindset. Arbitration should not be seen as an alternative, it should be the default way that commercial disputes are handled, efficient, and forward-thinking. So, what’s next? More legal professionals need to be trained, and more systems that support arbitration must be built at every level to make it part of the business DNA. By doing this, Armenia would not only encourage foreign investment, but also build something sustainable, a solid foundation of trust and clarity that international partners can rely on. The vision is already in motion, and the structure is solid. With just a few strategic moves, Armenia can become a trusted arbitration hub in the region.     This analysis is provided by Ms. Ani Davoodi, an Australian-registered international lawyer, currently visiting ELL Partnership Law Firm to support legal research and cross-jurisdictional exchange. The analysis is edited by Taron Simonyan, Founder of ELL Partnership Law Firm.
ELL Partnership Law Firm - July 2 2025

Labor Code Updates in Armenia: Forced Downtime Compensation, Digital system for signing employment

Concern Dialog's Senior associate, attorney Shushanik Stepanyan has prepared an client note on the amendments to the Labor Code in Armenia concerning Forced Downtime Compensation and the Digital System for Signing Employment Contracts. A separate section also addresses the draft law on Work Hour Reduction. Recent and Expected Changes in the Labor Code To raise public awareness, below we will discuss the recent and anticipated changes in the Labor Code of the Republic of Armenia (hereinafter referred to as the Labor Code or the Code). Regarding the amendment on payment for forced downtime: With the RA Law "On Amendments and Addendums to the Labor Code of the Republic of Armenia," dated October 2, 2024, No. HO-364-N, an amendment has been made to Article 265 of the Labor Code. The law came into force on November 24, 2024, and will apply to compensation obligations for forced downtime arising from judicial acts that were issued and came into legal effect as a result of claims accepted for proceedings after the law's entry into force. What was the situation before the law came into force? Before the mentioned amendment came into effect, under the existing regulation, if an individual legal act regarding dismissal was invalidated by a court decision, the court was obligated to require the employer to compensate the employee for the entire period of forced downtime. This was the case regardless of whether the employee had started working for another employer after the termination of their employment with the original employer. Now, when handling labor disputes, courts must take into account whether the employee has started working for another employer after the termination of the employment relationship. What necessitated the change? Although the law stipulates that labor disputes must be reviewed by the first-instance court within three months, this timeframe is typically not adhered to. This is due to factors such as the heavy workload of courts or motions submitted by participants in the proceedings that lead to delays. Additionally, the time required for higher courts to review cases—especially in instances where cases are sent back for re-examination—can significantly extend the overall duration. Under these circumstances, employers often find themselves in a particularly unfavorable position. Regardless of their fault or lack thereof, they are required to pay employees larger sums than they would if the procedural deadlines were met. In practice, many labor disputes take three years or more to resolve. The negative financial burden falls entirely on the employer, who is obligated to compensate the employee for the entire period of forced downtime, including the time consumed by court proceedings. What changes have been introduced? From now on, if an employee starts working for a new employer after the termination of employment with their previous employer, compensation can be claimed from the previous employer for a maximum of nine months of forced downtime, rather than for the entire period of forced downtime with the previous employer. How will payments be made? If the employee worked for the previous employer for more than nine months, they will be compensated for forced downtime based on the last nine months’ salary they earned at their previous job. If the employee worked for the previous employer for less than nine months, they will be compensated based on the salary they earned during the actual period of employment with the previous employer. If the employee earns a lower salary at the new employer compared to the previous one, the positive difference between the salaries will also be compensated. Specifically, the salary received at the new job will be subtracted from the salary earned at the previous job. If the difference is greater than zero, that amount will also be paid to the employee for the relevant period. Regulations on the Introduction of a digital system The RA Law "On Amendments and Addendums to the Labor Code of the Republic of Armenia," dated December 4, 2024, No. HO-525-N, introduces the possibility of implementing a digital system for signing employment contracts. What does the digital system for signing employment contracts entail? The digital system for signing employment contracts (hereinafter referred to as the "Digital System") will be a separate module within the electronic reporting system of the State Revenue Committee. Through this module, employers and employees will have access to an electronic interface (personal account). Employment contracts will be signed using an electronic digital signature via the Digital System. This means that once the Digital System is implemented and becomes mandatory, all employees will be required to have an electronic digital signature to sign contracts through the system. Who will have access to the Digital System? Access to the Digital System will be granted to the following entities: Inspection Body The Inspection Body will have access to the data within the Digital System to the extent necessary for performing supervisory functions prescribed by law. This includes monitoring compliance with the requirements of labor legislation, other normative legal acts containing labor law norms, and collective and employment contracts within the scope of their legally assigned powers. Relevant departments of the State Revenue Committee of the Republic of Armenia These departments will have access to the data in the Digital System to the extent necessary for verifying the proper documentation of an employee's hiring or registration applications, as well as ensuring tax control over calculated and paid income, income tax, social contributions, and other mandatory payments, as required by their legally assigned powers. Migration and Citizenship Service of the Ministry of Internal Affairs of the Republic of Armenia This body will have access to the data of foreign workers within the Digital System to the extent necessary for processing administrative proceedings initiated based on applications submitted through the unified electronic platform work permit. Employers and Employees As mentioned earlier, employers and employees will be provided with access to their electronic data through a personal account within the Digital System. In cases where employment relationships involve individuals under the age of 16, access to electronic data will be granted to the parent, foster parent, adoptive parent, or guardian who signs the employment contract. What problems will the Digital System address? The basic access provided by the Digital System will enable the Inspection Body to conduct effective monitoring, uncovering violations of labor legislation, including breaches of employment contract terms. The presence of the Digital System will eliminate the established practices of backdated contract signing, failing to register actual employment with tax authorities (illegal employment), or underreporting actual wages in contracts. The Digital System will allow employees to independently monitor the preservation of their rights arising from employment relationships. It will help them avoid situations involving illegal employment or exploitation. When will the Digital System regulations take effect? July 1, 2025: The regulations regarding the Digital System are planned to take effect on this date. During the initial phase, the signing of employment contracts via the Digital System will be voluntary. This transitional period will allow employers to adapt to the new system while identifying and addressing potential system flaws. January 1, 2026: From this date, signing, terminating, and amending employment contracts will be conducted exclusively through the Digital System. This timeline also aligns with the mandatory requirement for all individuals to submit annual income tax calculations (declarations) starting in 2026, as access to the Digital System will be integrated with the platform for filing declarations. What should employers do? Starting from January 1, 2026, within a twelve-month period, employers must input the employment contracts of their current employees into the Digital System (if those contracts were not originally signed through the Digital System). These contracts must be entered with their terms as they stand at the time of entry. The procedure for entering employment contracts signed before the law comes into force into the Digital System will be defined by the Government of the Republic of Armenia. What penalties are foreseen for violations of the Digital System regulations? Considering that the Digital System is a new tool requiring time for adaptation, the following penalties will apply (Article 41 of the "Code on Administrative Offenses"): First Violation: A warning will be issued. Repeated Violations Within One Year: If an employer commits another violation within one year after being subjected to an administrative penalty, a fine equivalent to fifty times the minimum wage (50,000 AMD) will be imposed on the employer. Expected Amendment to the RA Labor Code On the e-drafts.am platform, a draft law titled "On Amendments and Addendums to the Labor Code of the Republic of Armenia" is currently under discussion. This draft proposes to reduce working hours from 8 to 7 hours per day and from 40 to 35 hours per week, while maintaining current wages. The author of the draft is the Ministry of Labor and Social Affairs of the Republic of Armenia. Objective of the Draft: According to the authors, the adoption of the draft will promote the efficient allocation of time and resources between work and personal life (work-life balance). Specifically, it aims to provide opportunities for: ncreasing rest time. Spending more time with family. Reducing stress, tension, and overwork. Addressing personal issues fully. Allocating more time for self-development. Achieving balanced involvement across all spheres of life. Expected Benefits of the Draft: The draft is anticipated to: Increase work efficiency. Lead to productivity growth. Balance the relationship between work and rest. Enhance quality of life. Contribute to the creation of new jobs in both the public and private sectors. Current Status: The draft has not yet been included in the agenda of the National Assembly of the Republic of Armenia.
Concern Dialog law firm - February 7 2025

Issuance of Subordinated Bonds as a New Opportunity for Capital Market Development

A. Adoption of Basel III and Regulations. The implementation of Basel III, the new regulation developed by the Basel Committee on Banking Supervision in response to the 2007–2009 financial crisis, was a lengthy process in Armenia, concluding only in 2022. Basel III introduced new rules for the structure of banks' capital and assets, aiming to enhance the stability of the banking system by increasing both the quantity and quality of liquid assets. This regulation found its local and adapted reflection in "Regulation 2" on the "Regulation of Banks' Activity, Main Economic Normatives of Banking Activity," issued by the Board of the Central Bank of Armenia (CBA) and periodically amended. B. Subordinated Loans as a Capital Element for Banks. Regulation 2 provides banks the opportunity to attract subordinated loans under specific rules for capital replenishment. Subordinated loans can supplement banks' Tier 2 capital if they meet the specific requirements outlined in the regulation. For example, such loans must have a minimum term of five years, and early repayment requires CBA approval. In the event of financial distress, these loans may be converted into equity, transferring business risk to the lenders and acting as financial buffers for struggling banks. C. Opportunities for Issuing Subordinated Bonds. A review of international experience reveals that the market for subordinated bonds is currently experiencing significant growth, driven by the expansion of the private credit market and investors' search for higher returns. This presents a new opportunity for Armenia to attract foreign (and domestic) direct investments through the issuance of subordinated bonds by banks. To realize this potential, the current regulations should be adapted to accommodate the issuance of such bonds, which are particularly suited to these conditions. Additionally, it is worth considering the issuance of bonds without principal repayment, whose terms could align with those of shares and serve as primary capital (core or additional) for banks. D. Simulation of Subordinated Bond Issuance. Simulations conducted by our company indicate that uncertainties surrounding the timing, terms, and conversion process of subordinated bonds may deter banks from making decisions to issue subordinated debt. Furthermore, the publicity associated with such bonds could be seen as an unnecessary burden for banks in managing their financial condition. Lastly, the CBA’s broad discretionary powers in prohibiting early repayment may be viewed as a significant disincentive, particularly for smaller investors. E. Conclusion. The issuance of subordinated bonds offers a new opportunity to activate Armenia's capital market, including the attraction of foreign investments. To make these debt instruments appealing to foreign (and local) investors, it will be necessary to adapt the regulations governing subordinated loans and limit the regulator's broad discretion over repayment terms. Author: Got Margaryan (Mr)
Legelata Law firm - September 27 2024

Problems of taxation of operations with crypto-assets in the Republic of Armenia

Finally, after a long silence, the Republic of Armenia legally acknowledges that crypto-assets exist and is attempting to regulate relations in connection with the latter. This is evidenced by the Law on Amendments to the RA Civil Code, already adopted in the first reading by the RA National Assembly on June 13 2024, which clearly stipulates that a crypto-asset is property that has value or certifies a right. As part of the same legislative initiative, several other laws are being amended, in particular the RA Law ‘'On confiscation of property of Illegal origin’’, where the term “cryptocurrency” is being replaced by the term crypto-asset. It is surprising, however, that within the framework of this initiative; the Tax Code of the Republic of Armenia (the “Code”) remains unchanged, despite the fact that tax policy has occupied a central place in the public life in Armenia in recent years, particularly concerning fair and equitable collections. If there was no need to amend the Code, it presumably means that the provisions of the latter regarding the taxation of crypto-assets are comprehensive, clear, and predictable, reflecting the standards of countries with a democratic governance system. Therefore, all we have to do is to apply the laws to find out what kind of value-added tax, profit tax, and income tax obligations arise for individuals and legal entities when dealing with crypto assets. Our analysis begins with the immediate exclusion of the application of the Civil Code of the Republic of Armenia to clarify the terms within the Code, as Article 2 of the Code excludes the use of the RA Civil Code for this purpose. Therefore, the definition proposed by the new amendment is not applicable, and the Code should be considered a separate eco-system for interpretation and application. Value Added Tax According to Article 60 of the Code, transactions involving the supply of goods and provision of services are considered subject to value-added tax taxation. Moreover, the Code clearly states that the disposal of an intangible asset, as well as the provision of the use of an intangible asset, is considered a transaction for the provision of services. It is difficult not to notice that according to Article 4 of the Code, the terms 'asset' and 'intangible asset' adopt the logic of the RA Civil Code, which defines an asset as any property, property right, and personal non-property right. However, based on the fact that the Code excludes the application of the RA Civil Code to determine the meaning of its terms, it is unclear how the concepts of 'property', 'property right', and 'personal non-property right' should be interpreted. However, assuming that crypto-assets will at the very least be considered intangible assets within the meaning of the Code, it follows that any disposal or provision for their use will be subject to VAT. For example, if a legal entity operating a crypto-asset exchange trades AMD for crypto-assets, VAT must be added to the exchange price. This approach, of course, contradicts first of all the primary purpose for which crypto-assets are used. More developed countries, such as the USA, have regulated this issue in favor of the fact that the exchange is an exchange of two equal values and does not cause tax consequences. Income tax It also turns out that, following the aforementioned logic, the legal entity receiving cryptocurrency and paying funds to an individual must act as a tax agent and pay 10 percent income tax to the RA budget from the transaction amount (Article 150.9 of the Code). Understandably this regulation is also problematic and contradicts the essence of operations involving crypto-assets. If the goal is to tax profits, then individuals should be allowed to deduct costs, and the institution of the tax agent should be abolished, instead, enabling individuals to pay income tax on the difference between the initial and final value of the crypto-asset. Profit tax The provisions on profit tax will likely yield a result where legal entities will pay taxes on their profits. However, questions related to the valuation and revaluation of crypto-assets and their obligations remain open, which again creates uncertainties regarding their tax base. Conclusion To conclude, the provisions of the Code with regard to taxation of crypto assets are very uncertain and such uncertainty shall be interpreted to the benefit of the taxpayers. It does not bring predictability in terms of how much resource will be spent by the economic agents to protect their rights of making use of the uncertainty but currently it’s the cost of doing business with cryptocurrencies in Armenia. Author: Got Margaryan 
Legelata Law firm - June 26 2024